HTC Patents Challenged by Apple Probably Valid, Judge Say

By Susan Decker -
Sep 7, 2012

Apple Inc. (AAPL) may face a difficult task
invalidating two HTC Corp. (2498) patents for data transmission in
wireless devices, a U.S. trade judge said at a trial that could
lead to import bans on the newest iPad and next version of the
iPhone.

“Clear and convincing means something to me,” U.S.
International Trade Commission Judge Thomas Pender said
yesterday in Washington, referring to the legal standard in
determining that a patent shouldn’t have been issued. “I have
to be pretty darn certain a U.S. patent is invalid.”

HTC accuses Apple of infringing two patents it owns for
ways to reliably transmit a larger amount of data. Taoyuan,
Taiwan-based HTC said the patented methods are critical to the
4G technology known as LTE, or long-term evolution, that allow
faster downloads.

A victory could let HTC seek an import ban of the latest
iPad and even the newest iPhone, if it uses LTE when it’s
unveiled as early as next week. That could give the Taiwanese
handset maker leverage to force a settlement with Apple, which
has made its own patent-infringement claims against HTC.

The global smartphone market grew 62 percent last year to
$219.1 billion, according to Bloomberg Industries, and consumers
are demanding ever-faster downloads of movies, music and
websites on what has become more a handheld computer than a
simple phone. Carriers such as AT&T Inc. are converting to
faster LTE technology, and network-equipment maker Cisco Systems
Inc. (CSCO) projects that worldwide mobile-data traffic will soar 18-
fold by 2016.

LTE Advantage

HTC, which started as a contract manufacturer and now makes
devices under its own brand, has fought to increase its market
share after losing customers to Apple and Samsung Electronics
Co. (005930) Adding LTE capabilities to go up against Samsung’s 4G phones
is one way the company hopes to differentiate itself from other
phones that run on Android, the most popular platform for mobile
phones and the chief rival to Apple’s iPhone.

The newest iPad, which went on sale in the U.S. in March,
is the first from Apple that runs on LTE wireless networks.
Apple is expected to introduce its newest iPhone on Sept. 12,
and HTC can argue that it should be subject to an import ban
because it was in production during the pre-trial investigative
portion of the patent case.

When Pender asked whether Apple would be announcing its
newest iPhone next week, Apple lawyer Michael McKeon of Fish &
Richardson in Washington said he wasn’t told of the company’s
plans. “It will be thinner and the screen bigger?” the judge
asked. McKeon would only say, “That’s what the blogs are
saying.”

Patent Battles

Apple and HTC have been embroiled in patent battles over
features in smartphones since March 2010, when Cupertino,
California-based Apple filed its first infringement claim at the
trade agency. The case at trial yesterday, and an earlier case
HTC lost at the commission, “were filed in retaliation against
Apple,” McKeon said.

Apple contends phones by HTC and other competitors that run
on Google Inc. (GOOG)’s Android operating system copy features that
make the iPhone unique. The March 2010 complaint against HTC has
spread to a global war involving Apple and Android-handset
manufacturers that is being contested in courts on four
continents.

HTC lawyer Tom Jarvis of Finnegan Henderson said the
company was the first to sell Android and 4G devices and one of
the first with touch screens.

“HTC is an innovator,” Jarvis told the judge. “It’s no
Johnny-come-lately.”

Patent Purchase

In this case, though, HTC acquired the patents at issue in
April 2011, around the same time it began selling its first LTE
phone, the Thunderbolt. The patents are part of a portfolio HTC
bought for $75 million from ADC Telecommunications Inc.

“I don’t care if they bought these patents to sue you or
not,” Pender told McKeon. “They are a property right.”

In a court filing, HTC said it bought the patents, which
ADC said were being infringed by Apple, “to protect itself and
its customers from these aggressive tactics and to preserve its
ability to compete in the United States.”

Yesterday’s testimony, much of which wasn’t open to the
public, focused on whether HTC is using the technology, a
requirement to win the case under trade law.

“LTE products were particularly important to our strategy
in 2011,” when the complaint was filed, said Martin Fichter,
HTC America’s vice president of product and operations. “We’re
a pioneer in that field.”

Altered Allegations

HTC has altered its allegations in the case, McKeon said.
It initially claimed the patents covered Wi-Fi technology and
now says they cover 4G, he said. McKeon argued that the patents,
which relate to work that began in the 1990s, don’t cover mobile
technology at all.

The case on trial yesterday, filed in August 2011,
initially included five patents that HTC obtained from Mountain
View, California-based Google. Pender threw out that part of the
case, saying HTC didn’t have adequate ownership control under
the terms of its agreement with Google. The commission in July
upheld that decision.

Pender said yesterday he probably won’t side with Apple’s
argument that HTC didn’t have proper ownership rights of the two
former ADC patents.

The case is In the Matter of Certain Electronic Devices
with Communication Capabilities, 337-808, U.S. International
Trade Commission (Washington).